Circle Reverses USDC Policy on Gun Purchases in Response to Political Pressure

Circle, the issuer behind USDC—the second-largest stablecoin in the world—has amended its controversial policy banning firearm transactions. This decision follows significant political pressure and backlash from gun rights advocates and Republican lawmakers.

Key Takeaways

Circle has reversed its ban on firearm purchases using USDC due to political pressure.
The updated terms allow lawful transactions involving firearms, adhering to the Second Amendment.
The reversal follows criticism from gun rights groups and is linked to broader concerns about financial biases.
Stablecoins like USDC are becoming influential in the U.S. financial system, particularly post-GENIUS Act.
The situation highlights ongoing debates regarding the oversight of digital currencies and potential for censorship practices.

Circle Reverses USDC Policy on Gun Purchases

The company announced an update to its terms of service, now allowing lawful transactions that involve firearms. This change came after the National Shooting Sports Foundation (NSSF), a major firearms industry association, criticized the previous policy as “financial discrimination” against legal commerce.

“Circle has clarified our Terms to reflect that USDC may be used for the lawful purchase and sale of firearms, as protected under the Second Amendment,” stated a spokesperson from Circle to the NSSF. “We have not and will not deny the use of USDC for legally permissible transactions involving firearms.”

Circle's Updated Policy

Update Aligns USDC with GENIUS Act Framework

This policy reversal follows a report from Americans for Tax Reform (ATR), a conservative advocacy group, which revealed that Circle’s prior terms prohibited transactions related to “weapons of any kind, including firearms, ammunition, knives, or explosives.”

ATR emphasized that this ban raised concerns over private financial entities limiting lawful transactions based on political perspectives. They also highlighted Circle CEO Jeremy Allaire's campaign contributions to Democratic lawmakers, such as Rep. Jake Auchincloss (D-MA), who has introduced gun control initiatives.

The previously overlooked ban stated that using USDC for “weapons of any kind” was against the company's policy on prohibited transactions. Circle had reserved the right to monitor and restrict such activities, threatening to suspend accounts that violated these terms.

In the wake of ATR’s findings, the NSSF accused Circle of “ideological enforcement” against gun owners and retailers, asserting that “freedom cannot survive if your financial tools are turned against you and your Second Amendment rights.” They likened Circle's actions to the controversial practices of “Operation Choke Point,” which involved U.S. regulators allegedly pressuring banks to deny services to certain industries deemed politically unfavorable.

The situation garnered attention in Washington, with multiple Republican lawmakers using it as an example of “financial weaponization.” Senator Bill Hagerty (R-TN), who sponsored the recently enacted GENIUS Act stablecoin framework, noted that this reversal was a “victory against Choke Point-inspired mechanisms to achieve partisan goals.” He remarked, “America will no longer tolerate discrimination against citizens exercising their constitutional rights.”

Senator Cynthia Lummis (R-WY), another co-sponsor of the GENIUS Act, praised Circle's decision, stating it “aligns its terms of service with existing legal requirements and ensures financial systems cannot be used against law-abiding gun owners.”

Reversal Highlights Challenges in the Stablecoin Space

Circle’s updated policy, which now only limits weapons purchases “in contravention of applicable laws,” arrives at a time when stablecoins are increasingly influential in the U.S. financial landscape.

With USDC's market cap nearing $75 billion, Circle has solidified its position as a significant entity in digital finance. The company went public in June 2023, successfully raising over $1 billion through its initial public offering on the New York Stock Exchange.

Circle's Market Influence

Stablecoins have seen a surge in mainstream acceptance since the passage of the GENIUS Act in July, which established a federal framework for their issuance and regulation. This legislation prompted a wave of new stablecoin projects from major financial institutions including Bank of America, Morgan Stanley, and Robinhood.

However, the controversy surrounding Circle has drawn comparisons to the concerns raised about government-backed digital currencies. ATR’s report warned that Circle's initial restrictions might foretell similar controls that could accompany central bank digital currencies (CBDCs), where private companies might also “monitor and censor” transactions under political pressure.

The NSSF welcomed Circle's recent decision, describing it as a positive indication that private companies are beginning to recognize the risks of financial bias.